The 5 Most Common Bookkeeping Mistakes Therapists Make AND HOW TO FIX THEM
As someone who’s worked with therapists in private practice for years, helping them manage their finances, bookkeeping, and invoicing, I’ve seen some common mistakes come up again and again. These mistakes can cause unnecessary stress and confusion, but the good news is they are easy to fix.
If you're a therapist feeling overwhelmed by your finances, you're definitely not alone. In this post, I’ll walk you through the five most common financial mistakes I see therapists make and share tips on how to avoid them. Plus, I’ll share some of the mistakes I made when I was starting out, so you know you're not alone in making them.
Mistake #1: Mixing Business and Personal Expenses
This is a mistake I made myself when I first started out. I didn’t feel like I had a real business, so I didn’t set up a separate business bank account. At the time, I thought it was easier to keep everything in my personal account. However, as my business grew, I quickly realised how important it was to separate the two.
When you mix business and personal expenses, it can be really difficult to track your income and expenses accurately. It also makes doing things like completing your self-assessment much more time-consuming and stressful.
The Fix:
Open a business bank account. This will help you keep all business revenue and expenses in one place, making bookkeeping much easier. I recommend Starling Bank, as it’s free for sole traders, has an easy-to-use app, and allows you to keep track of payments in real time. Once your account is set up, ensure that all your income and expenses are handled through this account. If you're just starting out, you can put a small amount of capital in the account to get things going. This ensures that you have a clear separation between your personal and business finances from the very start..
Mistake #2: Not Keeping Up with Bookkeeping Regularly
A lot of therapists put off bookkeeping until the end of the year, which often leads to errors and missed opportunities. If you leave your bookkeeping until the last minute, you're not only increasing your stress, but you might also miss out on opportunities to collect overdue payments or cancel subscriptions you no longer need.
The Fix:
Set a monthly date to sit down and update your bookkeeping. I recommend choosing a specific day, like the first Tuesday of every month, so you make it a habit. Whether you use a spreadsheet or an accounting software like QuickBooks or Xero, doing this regularly will save you time and ensure that you’re keeping track of everything.
By staying on top of it each month, you’ll avoid the last-minute scramble when tax season comes around. If you're just starting out, using a spreadsheet is an easy and cost-effective way to track your income and expenses. I have one available to buy here or you can watch my YouTube video all about it and create your own!
Mistake #3: Not Having a Clear System for Tracking Client Payments
Many therapists don’t send invoices to clients and instead just ask clients to pay in advance or on the day of the session. While this might work when you have only a few clients, as your practice grows, it becomes harder to track payments. Not having a clear payment system can lead to missed payments or confusion for both you and your clients.
The Fix:
Implement a clear invoicing system. You can choose to send invoices on a weekly, monthly, or per-session basis—whatever works best for you. Make sure you're sending out invoices promptly and following up on any overdue payments. There are several tools available to help with this, including PayPal, Stripe, and even invoicing apps within banking platforms like Starling.
Having a clear and consistent invoicing process makes your business look more professional and helps you get paid on time.
Mistake #4: Not Tracking Business Expenses Properly
On the flip side of not tracking your revenue, therapists often forget to track their business expenses. There are many legitimate business expenses you can claim, such as travel costs, training, and even books related to your professional development.
The Fix:
Make sure that you are tracking all your business expenses properly. Ensure that these expenses are coming out of your business account, which will make them easier to manage. This includes things like travel to business events, online subscriptions (e.g., Zoom or Google Workspace), and training expenses. Make sure to keep receipts for everything you plan to claim as a business expense.
The more organised you are with tracking expenses, the easier it will be to calculate your net profit and complete your self-assessment come tax season.
Mistake #5: Not Saving Enough for Taxes
Many therapists make the mistake of not saving enough for taxes throughout the year. While it may seem like you have a lot of income coming in, you need to remember that a portion of that will go toward taxes. Without saving for it, you could find yourself scrambling at the end of the year.
The Fix:
Save a percentage of your net profit each month for taxes. I personally save 25% of my net income each month, even though I’m unlikely to need that much, to cover taxes and national insurance. This way, I’m always prepared when tax season comes around, and I don’t get caught off guard. If you have trouble saving, you can create a separate account for tax savings, or use an app like Starling that lets you set up different "spaces" for different types of savings. This way, the tax money is out of sight, so you’re less tempted to spend it.
5 Steps You Can Take Today!
Start with a business bank account: If you haven’t set one up yet, do it now. Separating personal and business finances is one of the first steps toward managing your finances properly.
Get on a regular bookkeeping schedule: Set aside a monthly time to do your bookkeeping. Even if you start with a spreadsheet, make it a habit.
Send invoices and track payments: Choose a system for invoicing that works for you, and stick to it. Make sure you follow up on overdue payments.
Track your expenses: Don’t miss out on legitimate business expenses that can reduce your taxable income. Keep all receipts and make sure you’re using your business account for all business-related purchases.
Save for taxes: Set aside a portion of your income each month for taxes to avoid a last-minute scramble.
Conclusion
Don’t worry if you've made any of these mistakes. Many therapists make similar errors, especially when they’re just starting out. The key is to start now and build solid systems. When you know better, you can do better and getting organised early will save you a lot of time, stress, and money in the long run.
Get Help with Your Bookkeeping:
If you're ready to tackle your bookkeeping and make these changes, I have a Sole Trader Bookkeeping Template that can help you get started. It comes with a video tutorial, and if you purchase it in April, you'll also get access to a free workshop where we’ll set up your bookkeeping system for the new tax year and process your April expenses together.
